November 25, 2009

How will your investments be handled once you get married? Will your investments be held after the marriage in joint tenancy or titled in your own name? Placing what was once in your own name into joint tenancy could be looked upon as a presumptive gift.This gives your new spouse the right to give away or sell any of what was once “yours”.Will that be oaky with you?

What about day-to-day managing of investments?Will a person who was not taking an active role in managing investments before the wedding, now placed in a role of active management?Suppose you both were actively managing your investments before signing the prenuptial agreement, will one person be asked to step aside so the other person can takeover?

Are some of the investments promised to children from prior marriages, ex-spouses or other family members?Was there a gifting program or plan in place?How will a new marriage impact your planning?

From a tax or estate perspective, does it make sense to do anything specific with those assets before the wedding? And after the wedding how will you maximize those investments?

November 24, 2009

The first money conversation should take place at a table with both sides showing their credit reports, savings, investments and debt figures.Believe it or not, each of you should show every dime. Both partners should start the process by talking about how debt should be paid off and by whom?Should it be paid by the person who accrued it, or by both potential spouses?

Couples also need to decide how they will handle debt going forward.Will the new debt be accumulated jointly or separately?What if one of the new spouses gets into trouble, with a job loss or pay reduction, then what happens?What if an illness is the cause of new debt?How will that debt be handled?

What role will the extended families play in any debt reduction plan or execution of the plan?Suppose there’s a rich uncle who is a close relative of one of the partners?Will that rich uncle be requested to be a source of funds?

November 23, 2009

Blended families bring their own financial complications. Indeed, if couples are bringing children from previous marriages into a blended family, it’s necessary to establish not only how they will be supported and educated, but also what percentage of the family assets they will be entitled to in case their biological parent dies. There may be alimony and other support arrangements already in place for ex-spouses and children from earlier marriages as well as elderly parents to support. All of these financial requirements need to be understood and spelled out beforehand.

There are specific estate planning tools and techniques to make certain your wishes happen as you hope for.These specific tools and techniques can be addressed in the prenuptial agreement.For example, there may be a Child Trust or a QTIP Trust in place for one of the parties to the prenuptial agreement.These trusts should be identified and discussed to the extent needed to make the upcoming nuptials as happy as possible.

November 20, 2009

As the holidays approach, plenty of couples think about marriage. That includes older couples with kids, accumulated assets and debts and previous marriages behind them.

That’s why marriages for older individuals require a specific sort of planning. For couples making another effort at marriage, a prenuptial agreement can either set the groundwork for a new and trusting relationship or reveal money issues may prevent the marriage from working well.

It’s actually not the agreement by itself making the difference.The difference is the way the couple gets the agreement down on paper. When two parties sit down to formalize a prenuptial agreement with their respective mediators or attorneys, it requires both sides to make full disclosure of their current financial situation and long-term money goals.

Prenuptial agreements can be considerably more complex for couples making a repeat trip down the aisle. Money issues are not just a matter of full disclosure between two people.In remarriage, money issues can affect a much wider audience including aging parents, siblings and children and ex-spouses from previous marriages. In some cases, there are sizable business and personal assets gathered before the upcoming wedding day that must be protected.

It is always wise to consult both financial planners and attorneys.For legal documents to hold up in court, you will generally need to have the documents reviewed and presented by respective family law and estate attorneys.

Over the next few posts we’ll discuss the primary issues any remarrying couple should discuss ahead of a formal engagement.

November 19, 2009

This seems to be the i-generation.We have ipods, iphones, and lots of other i-stuff.Now, we have Series I-Bonds.Series I Savings Bonds, also issued by the U.S. Treasury, might be worth considering after rates finally head upward. I-bonds are sold with a fixed interest rate, which never change, plus an inflation adjustment. It’s a good idea to buy them when the announced fixed rate is high, because you’ll be guaranteed that fixed return over the life of the bond plus any additional inflation adjustments later. The fixed interest rate at issuance guarantees a minimum return, plus any benefits from future inflation adjustments.

Unlike other bonds, purchases of I-Bonds are limited to $10,000 per year per investor.So in addition to investing in your name only, you may be able to buy I-Bonds under the name of your spouse, your trust accounts and in the name of your children. Before you start buying, it might be a good idea to talk to your tax professional about the potential impact once you redeem them.

November 18, 2009

Treasury Inflation-Protected Securities (TIPS) are Treasury securities whose principal and coupon payments are indexed to inflation based on the movements of the Consumer Price Index. Like ordinary Treasury securities, TIPS have a fixed coupon interest rate but principal is adjusted to reflect the inflation rate. If inflation goes up, the amount of principal to be paid at maturity rises. Coupon payments rise along with the principal since the rate is calculated on the principal amount. If your bet goes wrong and there’s deflation, you won’t lose your principal. There’s a floor at par. When rates rise, TIPS lose value, but they tend to lose a little less because of inflation protection. It might be best to own TIPS in an IRA or other tax-advantaged account because the periodic inventory adjustment is subject to ordinary federal tax at intervals before the bond matures.

TIPS are issued in terms of 5, 10, and 30 years. The 30-year TIPS isn't offered in Legacy Treasury Direct, but is available in TreasuryDirect.When buying TIPS, the interest rate on a TIPS is determined at auction.TIPS are sold in increments of $100, and the minimum purchase is $100.TIPS are issued in electronic form so you won’t actually receive a certificate.You can hold a TIPS until it matures or sell it in the secondary market before it matures.The price you receive in the secondary market will depend to a great extent on interest rates.If rates are rising above the rate you hold then it’s very likely you’ll receive less in the sale of your TIPS than your purchase price.In a single auction, an investor can buy up to $5 million in TIPS by non-competitive bidding or up to 35% of the initial offering amount by competitive bidding.When it comes to bidding, check with your bank or broker since only they can handle competitive bids.

November 17, 2009

As we have often discussed in the past, your emergency fund should be liquid enough to access at any time.For emergency funds and other forms of savings, a rising rate environment may actually be a good thing.

One way to take advantage of the rising rate environment is through a process known as “Laddering.” “Laddering” means buying CDs, T-bills or other similar investments with staggered maturity dates, so the investments become available on a series of dates in the future.As the cash becomes available, it can be re-invested in similar investments, now with higher interest rates.Doing this on a consistent basis allows you to have cash available when needed and lets you take advantage of rising interest rates.

Think of laddering as the steps of a ladder.The process allows a saver to redeposit CDs, interest bearing notes, T-bills, corporate bonds or any other investment with a fixed maturity date into something else that pays a little more as interest rates rise.

November 16, 2009

Earlier in 2009, mortgage rates were at 50-year lows. While mortgage rates have bounced around in recent months, an economic recovery may mean rates are headed up. If you need advice on whether refinancing is right for you, consider contacting a financial planning professional who can examine your whole financial picture and determine whether the timing and terms of a refinancing make the most sense.

Some critical areas to review when refinancing go beyond the interest rate.Ideally, looking at the total cost of the new loan versus the old loan makes the most sense.Unfortunately, it is way too easy to focus on the interest rate while forgetting the closing costs, the new term, and the impacts of taxes on the overall picture.

November 13, 2009

While the struggling economy has put a vice on inflation, many experts don’t expect things to stay that way for much longer. Why? Many economic experts fear the current level of federal spending will inevitably lead to printing more money, and that’s regarded as an inflationary solution.

As of late August, the federal deficit was estimated at $1.58 trillion and expected to increase roughly $1 trillion more based on the final size of the new healthcare plan. Even if inflation moves slowly, it’s not a bad idea to start thinking about some savings, spending and investment strategies that take inflation into account. Over the next few posts we’ll address a number of strategies.